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American Eagle Outfitters

American Eagle AEODividend Yield: 2.6%

First up, we have brand that was all the rage when I was in high school: American Eagle Outfitters (AEO). Unfortunately, trends change … and that has been reflected in AEO’s share price. The stock traded for nearly $35 back in 2006, but is currently going for under $20.

AEO also is sitting in the red so far this year, in part thanks to a first-quarter drop in earnings and sales.

But that could be the perfect storm. If American Eagle regains momentum, investors would be treated to both stock gains and income — AEO has been rewarding shareholders since 2004, and its current 12.5-cent per share payout yields 2.6%. That dividend would also protect against any small short-term headwinds.

There are other reasons to like American Eagle, though. For one, AEO has no long-term debt vs. nearly $500 million in cash and short-term investments. And the company also is fairly valued; American Eagle is expected to grow earnings by more than 11% annually over the next five years, which is right in line with its current forward P/E.

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